How recent is this pic of the German Sheppard laying in front of the bulkhead seats? Not so long ago AA changed the pet policy to 1.) disallow all emotional/comfort pets 2.) require all carry on pets be able to fit in a small enough soft or hard carrier that can fit under a seat in front of you and never be taken out during flight and 3.) Allow service animals to travel with specific, documented training for the particular disorder/disability/impairment of its owner. Given the carry on(non service animal) rule, the downgraded F passenger referred to in the OP should have been assigned a seat that didn't have a bulkhead in front of it. I'm not suggesting this is the reason they were downgraded though. It sounds like the GA really didn't pay much attention to who should be downgraded and who shouldn't.
This was pre-Covid, as evidenced by the American Way magazines in the pocket. I believe it was an AUS-DFW flight in 2019. This was a legitimate service dog. The human passenger was legally blind. I have to say I would not have been excited to be in the middle seat next to her (she was in the aisle seat) but everyone was good natured about it. The dog behaved impeccably during the flight.